By Frank Conway – MoneyWhizz.org
Back-to-school expenses can place an excessive financial burden on families. So, it is important families are prepared; to budget effectively and where necessary, borrow prudently in the run-up to the back-to-school expenses rush.
Following are some simple tips to help families prepare:
- Set your money target – work out how much is needed to cover costs
- Review your income – regardless of whether one is employed or self-employed, they must know their the financial bottom line especially their net take-home pay each month (plus any additional money received).
- Identify all expenses – this includes all costs, fixed (mortgage, car payment etc) and variable (groceries, entertainment etc).
- Set your timeline – if the target is to save €1,200 over the course of a full year (this is slightly more than parents pay in back-to-school costs) this works out at €100 per month.
- Stick to the plan – but be flexible. The best way of reaching a money goal is to build in flexibility. No month will ever be the same. Strive to save more than the target amount during months where cash is available as there will also be months where cash will be tight. Over time, it should all balance out.
Some parents have little choice but to use borrowings to pay for back to school costs, the following are some useful tips to help them borrow effectively.
- Credit cards – make the maximum payment, not the minimum. This way, users have the greatest chance of paying the least amount in interest charges and fees – which can add a significant financial cost otherwise.
- Short-term – longer term loans may offer the convenience of lower monthly repayments but they also cost much more in interest charges which increase the overall cost to the borrower.
- Check the APR, not the rate – the Annual Percentage Rate is the absolute measure of the cost of money and the best measure of the true cost of borrowing.
- Avoid late payment charges – those can really add up and make loan repayments crippling.
- Say no to money lenders – some charge up to 200% interest rates which cost borrowers significantly more over time.
With sufficient planning and the right amount of money knowledge, back-to-school expenses can be minimized ensuring parents have peace of mind.